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Credit, Credit Scoring & Identity Theft
Presentation Objectives
Harvard University Credit Union Overview Credit – The Three C’s Credit Report Basics Identity Theft Credit Score 101 Contact Information
About the Credit Union
The Harvard University Credit Union is a financial institution exclusively serving the students, alumni, faculty, and staff of Harvard University and the affiliated hospitals. Family members are also eligible.
Member Owned Every member is an equal shareholder Volunteer Board of Directors elected by the membership
Our mission to provide our “members” with financial empowerment and education.
Although we offer a full range of banking products, we are very proud of the fact that we are not a bank
Credit Basics
Credit – Utilizing something now (e.g. education, car or home) and paying for it over a period of time.
3 C’s of CreditCharacter – How well do you honor your financial
obligationsCapacity – How easy will it be for you to repay the
debtCollateral – Will the loan be secured by something
Credit Bureau Report Information on Credit CharacterCredit Bureaus
Collects information about the creditworthiness of individuals.
Distribute a credit report which contains all the information relevant to a person and the credit score calculated by the agency
Three major credit reporting agencies• Equifax• TransUnion• Experian
What’s on the Credit Report?
Personal Information Names, current & previous addresses, employers, date of birth
Credit Information Credit granted and history & timeliness of repayment, revolving,
installment or open ended, payment patterns for past 7 years
Public Record Information Records found on public documents: bankruptcies, tax liens, collection
accounts, overdue child support
Inquiries List of creditors and agencies who have requested your credit report
Who Reviews Your Credit?
Employers Landlords Automotive dealers Professional licensing boards Insurance companies Financial lenders Others
Getting Your Credit Report
www.Annualcreditreport.com Receive a free copy of report from each of 3
bureaus
- order report every 4 months to monitor
Must provide free if denied credit within 60 days
Review for accuracy annually
Dispute incorrect information
MYFICO.COM
Annualcreditreport.com
Identity TheftFinancial Identity Theft
Where do thieves obtain information?Trash – discarded ATM receipts, bank receipts etc.On-line: Facebook, etc.E-mail- phishing scamsStealing credit cards/ walletPublic records Infiltrate IT systems – WIFI
Who Can Be a Victim of Identity Theft?
AnyoneTiger Woods, Will Smith, Ted Turner, Martha Stewart CEO’s GrandparentsChildren
College students7 million people last year
Identity TheftHow to Protect Yourself
Shred mail and account information
Don’t advertise on-line – DOB
Never provide personal information without verification
Confirm website/ WIFI security before using
Check your credit every four months
Repairing Credit
Errors Occur with Credit Reporting Information
Law is in consumers favor to resolve items
Money Management Workbook provides more information on resolution process
What Is Credit Scoring ?
Credit Scoring is a system used to facilitate decision making
Method of converting large amounts of difficult to compare data into a single point score that facilitates comparison
Process of analyzing past performance trends to predict future performance
What Is Your Credit Score?
Forecast of how well you will repay a loan as agreed during the next 24 months the higher the score, the better the model indicates that
you will repay
Snapshot of your credit history at a particular point in time
Only includes factors related to an individual’s credit
Always changing
Credit Score Ranges
Fair Isaac, Co – Founded in 1956
FICO Scores range – 300 to 850
Only 18% of population have a FICO Score of 800 or better
7% of population have scores below 500
Credit Score Factors
Payment History – 35%
Amounts Owed – 30%
Length of Credit History – 15%
New Credit – 10%
Types of Credit in Use – 10%
Score Factors: Payment History
Payment history on all accounts
Payment information on types of accounts
Public records
Number of accounts with no late payments
Details on late payments Severity, frequency, how recent, amount
How to Improve Pay Bills on time If you miss a payment, get current Ask for help with lender
Score Factors: Amount Owed
Amount owed on accounts
Balances compared to high credit or original balance
Number of accounts with balances
How to Improve Keep balances low on credit cards Don’t open multiple credit cards Pay off debt rather than moving it around
Credit Impact: Slow Payments
One 60 day delinquency can decrease a credit score by…
50
75100200 points
Credit Impact: Rates and Payments
Credit Score APR Monthly Payment
720-850 5.204% $752
690-719 6.728% $769
660-689 8.666% $791
620-659 12.235% $833
590-619 18.141% $906
500-589 19.258% $920
<500 Not eligible
Source: Myfico.com – 36 month car loan - $25,000
Poor Credit: Costs vs. Savings
Mortgage costs – extra $200 to $300 per month per $100,000 borrowed
Insurance costs, credit card costs, other borrowing - $100’s extra per month
Pay extra for borrowing or pay yourself…
Managing Credit
Obtain a copy of your credit report every four monthsAnnualcreditreport.com
Protect yourself from identity theftLoose paper, date of birth
Pay your bills on-time
Build your credit history - methodically